Secured Business Loans
The complete guide
This form of lending is also known as asset-backed lending. Secured loans are financial products that require businesses to offer up collateral as part of the borrowing agreement. A commercial asset, such as property, equipment or land against your loan, could give you access to a high value secured business loan from £5000 to £2 million+. The lowered risk for the lenders offers interest rates and repayment terms that are very competitive. It is important to be aware that in the unfortunate instance your business can not make the agreed repayments the lender could repossess the asset to recover the funds.
Benefits
Repayments and interest rates are generally lower for a secured business loan compared to an unsecured business loan. Lenders offer greater flexibility with their funding arrangements, offering generous repayment terms of up to 10 years.
There are numerous benefits of a secured business loan. Interest rates and repayments are generally lower than with an unsecured business loan, making a secured business loan cheaper to repay. Lenders can offer generous repayment terms of up to 10 years and are generally more flexible with their funding arrangements. Secured business loan lenders offer larger loan amounts from £5k up to £2m+. As a business, you could get up to 100% of the value of the asset and have a longer amount of time to make repayments, in fact up to 10 years. Lenders will offer lower interest rates and smaller repayment amounts as well as work with businesses will poor or bad credit history. A secured business loan is a great medium to long term funding solution. Smaller fees are charged and higher amounts of funding are available to borrow because the security lowers the risk for the lender.
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Secured business loans provide a financing option where a valuable asset is used as collateral to secure the loan. This asset can range from commercial properties to personal or business assets like machinery, equipment, vehicles, or inventory. The lender assesses the value of the asset and provides funding based on that evaluation.
The application process for a secured business loan is similar to that of a mortgage, and it may involve a valuation of the asset being used as security. The loan typically has a fixed interest rate, and repayments are made monthly over the agreed-upon term until the loan is fully repaid.
It's important to note that if the business fails to repay the loan, there is a risk of the secured asset being repossessed by the lender. This is done to recover the outstanding loan amount. It's essential for borrowers to carefully consider their ability to repay the loan to avoid the potential loss of the secured asset.
For example, let's say a business uses a commercial property valued at £150,000 as security for a £150,000 loan with a 5-year term and a fixed annual interest rate of 10%. In this scenario, the business would make 60 monthly repayments of £3,187.06, resulting in a total repayment amount of £191,223.60 over the loan term.
Secured business loans can be a viable option for businesses looking for long-term financing and are willing to use valuable assets as collateral to secure the loan. It's recommended to carefully assess the terms and conditions, including interest rates, repayment terms, and potential risks, before proceeding with a secured business loan.
How much can I borrow?
The amount of funding you can borrow in a secured business loan is determined by the value of the asset you use as security. Most lenders are willing to lend up to 100% of the asset's value. For instance, if you're seeking a loan of £100,000, the asset you provide as security should be valued at £100,000 or higher.
Lenders consider a wide range of tangible and intangible business assets as acceptable collateral. Common examples include land, machinery, equipment, vehicles, and personal or commercial assets. In some cases, lenders may accept multiple assets to establish the net worth required to secure the loan. Personal assets, such as cars, residential properties, and shares, can also be used as security against a business loan under certain circumstances.
Additionally, lenders may request a personal guarantee as an additional form of security. A personal guarantee is a legally binding agreement made by the business owner or director, who becomes personally liable for repaying the debt if the business is unable to do so. This makes the director or owner the "guarantor" and can be accompanied by supporting security, such as a legal charge on the guarantor's personal asset.
The requirement for a personal guarantor can vary among lenders. Some lenders may insist on a personal guarantor to enhance the level of security, while others may not require one. If a lender requests a personal guarantor, Winchester Corporate Finance will discuss the terms and conditions of such an arrangement with you.
It's important to carefully consider the implications of providing personal guarantees and evaluate the potential risks involved before proceeding with a secured business loan. Seeking professional advice and guidance can help you make informed decisions about securing funding for your business.
Most lenders will lend up to 100% of the asset value.
The amount of funding you can borrow in a secured business loan is determined by the value of the asset you use as security. Most lenders are willing to lend up to 100% of the asset's value. For example, if you are looking to borrow £100k, the asset you provide as security should be valued at £100k or higher.
Lenders consider a wide variety of tangible and intangible business assets as acceptable collateral. The most common assets include land, machinery and equipment, vehicles, and personal or commercial assets. Some lenders may accept a combination of assets to establish the required net worth for securing the loan. Personal assets, such as cars, residential properties, and shares, can also be used as security against a business loan under certain circumstances.
In addition to assets, lenders may require a personal guarantee as an additional form of security. A personal guarantee is a legally binding agreement made by the business owner or director, who becomes personally liable for repaying the debt if the business is unable to do so. This means the director or owner becomes the "guarantor" and can be made with or without supporting security, such as a legal charge on the guarantor's personal asset.
The requirement for a personal guarantee may vary among lenders. Some lenders may insist on a personal guarantee to enhance the level of security, while others may not require one. If a lender requests a personal guarantee, Winchester Corporate Finance will discuss the terms and conditions of such an arrangement with you.
It's important to carefully evaluate the assets you intend to use as security and consider the potential risks and obligations associated with a personal guarantee before proceeding with a secured business loan. Seeking professional advice and guidance can help you make informed decisions about securing funding for your business.
"Startups with no trading history can be accepted."
The distinction between tangible and intangible assets is relatively straightforward. Tangible assets are physical assets that can be touched, such as property, equipment, stock, land, cash, accounts receivable, vehicles, and machinery. On the other hand, intangible assets are non-physical assets that cannot be touched but hold value, such as trademarks, patents, copyrights, licenses, and intellectual property (IP). Specialist lenders are willing to consider intangible assets as security for loans, although valuing them can be more challenging compared to tangible assets.
Secured business loans offer several advantages over unsecured loans, including better interest rates. Lenders typically offer larger loan amounts for secured loans, and the value of the collateral used as security will often determine the available funds for borrowing. Longer repayment terms make it easier for business owners to manage the loan, as they can budget effectively over a more extended period, allowing them to focus on business growth.
The presence of collateral in secured loans minimises the risk for the lender, enabling them to offer significantly lower annual percentage rates (APR) to borrowers. Secured business loans can be an option for businesses with poor or bad credit history, as the security reduces the lender's risk. Even startups with no trading history or credit history can be considered for a secured loan, as they can use their company assets as collateral.
It's important to note that while secured business loans have advantages, there are risks involved, as with any financial product. It's crucial to carefully evaluate the terms, conditions, and potential risks associated with securing a loan against your assets. Seeking advice from professionals, such as Winchester Corporate Finance, can help you navigate the process and make informed decisions regarding business funding.
Requirements and criteria
When taking out a secured business loan, it's important to understand that the assets you use as security are at risk of being lost if you fail to meet the repayment agreement set by the lender. In such cases, the lender may repossess the asset to cover the outstanding debt. However, repossession is typically a last resort for lenders, and they will usually explore alternative options before taking this step. If you find yourself in a situation where you're unable to make repayments or your circumstances change, it's crucial to inform the lender immediately and discuss possible solutions.
If you're a small business or sole trader struggling with debt, there are organizations like the Business Debtline that can provide free advice and support specifically tailored to business debt.
To qualify for a secured business loan, there are certain requirements that need to be met. These typically include being a UK registered business that has been trading for at least three months and owning one or more valuable assets that can be used as security. Unlike traditional high street banks, our funding partners generally do not require comprehensive business plans to process your application for a secured loan. However, if you have a poor credit history, you may be asked to demonstrate a sustained period of growth.
At Winchester Corporate Finance, we only work with professional lenders who adhere to best practices. Many of our partners are members of trade associations such as the National Association of Commercial Finance Brokers (NACFB) and are regulated by the Financial Conduct Authority (FCA). Even if your business doesn't meet the specific criteria, we can still assist you in accessing funding options by leveraging our network of lenders and guiding you through alternative solutions that may better suit your business and situation.
What if you have poor credit history?
It's true that having a poor credit history can make it difficult to secure funding from traditional high street banks. However, Winchester Corporate Finance can provide a solution by accessing alternative business funding options through our panel of lenders. We understand that poor credit history can be a part of a company's business lifecycle and may be caused by various factors, such as late payments from customers leading to difficulties in paying suppliers. We have experience in helping businesses with bad or poor credit history find secured business loans.
With numerous loan products available in the market, finding the right one for your business can be challenging. That's where Winchester Corporate Finance comes in. We have helped countless businesses secure the funding they need to thrive. Our advice is impartial, and we strive to find the best-fitting finance solution for each business's unique needs. Whether you need to bridge gaps caused by unpaid invoices or support your company's growth, we can assist you, regardless of your business type.
As a broker, our services come completely free of charge to customers. We are here to guide you through the process and help you access the funding you require without any additional costs.
Email: hello@winchestercf.com
Tel: 01243 786258
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